U.S. orders for durable goods—products that have a life expectancy of three or more years—increased 0.4% percent, the Commerce Department said Wednesday. The report also indicated that orders for core capital goods— a measurement indicative of business expenditure— were up 0.8%, after two months of decline.

The overall increase was mostly from an unexpected boost in the transportation category. And economists said that, despite gains in core capital goods, underlying data indicates that business investment has lost its momentum and a slowdown in growth is likely in coming months as issues surrounding a decline in the global economy, Brexit, tension with China, trade disputes and tariffs continue to affect business confidence.

“It was better than expected, but it was primarily just a surprise in the aircraft category,” said Michael Moran, chief economist at Daiwa Capital Markets of the headline number. “If you step back and look at orders excluding transportation, you’re running roughly flat since last summer.”

Transportation orders—which are notorious for being volatile—had led the overall increase for the past couple of months with a 15.9% increase in nondefense aircraft and parts orders in January. However—in light of the recent crisis with Boeing—transportation most likely will not be able to bolster the data in the future.

“The biggest surprise was the further strength in transportation orders. It’s aircraft and, unfortunately, with the Boeing story, it’s not likely to last,” said Christopher Low, chief economist at FTN Financial.

Boeing’s 737 MAX 8 was involved in its second fatal crash in five months last Sunday. Since then, several countries have grounded the model. Wednesday, Donald Trump announced that all U.S. carriers of the 737 MAX jet would halt flights as well.

Aside from the surprise jump in aircraft orders, economists were underwhelmed with the rebound in core capital goods. They said the increase isn’t enough to make up for two months of decline and is not necessarily representative of strong business spending in the future.

“Business investment last year was pretty good, but we were losing momentum already,” said Low. “Even the sectors where there were decent gains, they’re coming on the heels of pretty big declines. The bounce in orders was insufficient to reverse the recent decline, so it’s a partial recovery.”

Orders for core capital goods may continue to experience volatility as global economic uncertainties loom over business investment. For many businesses in the manufacturing industry, uncertainties, such as the steel and aluminum tariffs, have a significant impact on day-to-day operations.

Robert Roth, CEO of RoMan manufacturing in Grand Rapids, MI— a company that specializes in the design and production of transformers and power suppliers and works with steel and aluminum— said his company was hit hard by global tariffs.

“Whenever there is a government intervention like a tariff, where they are trying to accomplish one thing, there ends up being winners and losers, and in this particular case, our company is on the losing end of whatever the administration is trying to accomplish,” he said.

In addition to higher prices for steel and aluminum, RoMan also exports some of their products to China which gets slapped with a retaliatory tariff.

To absorb cost increases, Roth has increased the price of his product for customers and in some cases has resorted to sourcing product from foreign countries that don’t have a tariff.

“The foreign supplier is buying steel un-tariffed, and since they’re converting that into another product, it comes into this country un-tariffed. So, it’s put them at a competitive advantage over the domestic suppliers of the same product,” Roth said.

On the other hand, for Jonas Allen, president of Byer Steel manufacturers in Cincinnati, OH—a company that fabricates rebar and deals heavily with steel—the tariffs significantly helped his company raise revenue. Enough so that he was able to give out bonuses to his staff and even wants to add on an entire extra shift of about 11 people.

“The tariffs on steel have been helpful for our company,” he said. “It’s allowed us to have a little bit of upward price pressure, so it’s taken us from being a losing entity, where we were losing money, to a profitable one.”

He had noticed a decrease in orders recently for some of his product, but he attributed that to a decline in construction projects during the bad weather, specifically the polar vortex that enveloped most of the Midwest in January. He expects orders to pick up as the weather improves.

Despite companies’ different experiences, metal orders, which are good cyclical indicators for improved economic growth, didn’t fare well in the report. New orders for fabricated metals dropped .6% in January and orders for primary metals fell 2.0%.

“I think it’s supportive of the view that this area has lost momentum recently,” Moran said of the metals category.

Not all economists were so dismal about the report’s findings. Brett Ryan, U.S. economist for Deutsche Bank Securities, expressed optimism about the report and the manufacturing industry as a whole.

“It indicates a decent start to the quarter for business spending, and hopefully that momentum continues through the first quarter,” he said. “I think the manufacturing outlook still remains pretty decent.”

Still, he admitted that for durable goods orders to continue to grow, global factors would need to improve, specifically around tariffs and trade disputes with China.

“We need to see global growth rebound in the coming quarters for the manufacturing sector to get a big boost,” he said.

]]>http://dismalscience.journalism.cuny.edu/2019/03/21/durable-goods-report-better-than-expected-but-economists-arent-too-impressed/feed/0The Trade Deficit Hit an All-Time High at the End of 2018http://dismalscience.journalism.cuny.edu/2019/03/20/the-trade-deficit-hit-an-all-time-high-at-the-end-of-2018/
http://dismalscience.journalism.cuny.edu/2019/03/20/the-trade-deficit-hit-an-all-time-high-at-the-end-of-2018/#respondWed, 20 Mar 2019 19:07:38 +0000https://dismalscience.journalism.cuny.edu/?p=949Despite President Trump’s insistence that he could negotiate his way to a lower trade deficit, the gap hit an all-time high of $891.2 billion in 2018.

The monthly trade gap widened from $50.3 billion in November to $59.8 billion in December, which was a bigger gap than what most economists had initially predicted. Imports rose by $5.5 billion from November, and exports fell by $3.9 billion.

Trump has used the trade deficit as a ruler for measuring how well the economy is doing on the whole, despite the fact that many economists would argue that it speaks to Americans’ rising buying power. “It doesn’t signal that the economy is weakening,” said Ryan Sweet, and economist with Moody’s Analytics, Inc.

The increase in imports is partially due to Trump’s efforts towards economic stimulus: as tax cuts, for example, leave Americans with more money in their wallets, they spend them on imported goods like clothes and electronics.

At the same time, Trump’s unpredictable approach to trade negotiations has had companies stockpiling goods for fear that they might see new tariffs in the near future. The deficit is likely to continue to reflect that practice through the early months of 2019.

Stephen L. Stanley of Amherst Pierpont Securities, LLC. said the extra imports are showing up in companies’ inventories. “All we’re really doing is moving things around on when they come into the country,” he said. He said he does not expect the rise to affect the GDP because the United States is importing the same amount of goods in the long-term.

“We’ve already been seeing the reactions to people’s fears,” said Richard Moody, an economist with Regions Financial Corporation. He said the turbulence of President Donald Trump’s trade war with China has left many companies preparing for the worst. “A lot will depend on how these trade disputes get resolved.”

The United States also saw a decline in exports. Other countries have seen their economies slow, which has reduced the demand for American exports.

Retaliatory tariffs are not helping, either. President Trump’s trade war has ultimately led to higher tariffs on American products in China and in turn, China is buying less from the U.S. The Trump Administration delayed imposing higher tariffs on China, though negotiations are ongoing. Still, the announcement of the delay came too late for American companies who were preparing for the possibility of even more new tariffs to change orders.

At the same time, Sweet said he was skeptical about how long that growth would continue. “We’re putting the economy on a sugar high,” he said referring to the Trump Administration’s moves to stimulate short-term growth, like tax cuts. The United States’ demand for imports could decrease if the economy were to slow down.

Since his 2016 presidential campaign, Trump has promised to narrow the trade gap while simultaneously stimulating the economy. Economists had a “told you so” moment this past week when the new numbers proved Trump had not defied economic theory by making both happen.

The new figures also do not give a clear answer of what the future holds. “It might get a little smaller. It might get a little bigger. It’s not going away anytime soon,” said Moody. As Trump’s trade talks with China continue to be unpredictable, companies will continue to plan for the worst.

Sweet said that China might buy more goods and services from the United States, but that is not likely to happen this year. “All the deals have been more symbolic than substantive.”

Growth in U.S. home prices slowed in December for the ninth consecutive month, but buyers are still struggling with affordability.

National home prices rose 4.7% in December,
down from 5.1% in the previous month, according to S&P CoreLogic
Case-Shiller. In the 20-city composite, which measure changes in residential
house prices in 20 large metropolitan regions in the United States, the year-over-year
gain came in at 4.2%, down from 4.6% in November.

Rising mortgage rates, coupled with
previous price gains, are putting many homes out of reach for prospective home buyers.
Even as home price gains are slowing, they are still increasing faster than
average wages, making homes more difficult to afford. The situation is also
hurting sellers, who may have to lower their asking prices and wait longer to
sell.

“House prices are starting to get high enough now that, related to income, there is going to be restraint,” said Stan Shipley, managing director and economist at Evercore ISI. “Even with low mortgage rates, home buyers still have sticker shock when they are trying to buy a home.”

Economists see the smaller gains as a sign
that the housing sector has largely played itself out, but that does not
necessarily mean bad news for the economy.

“The slowdown is more modest and not as
apocalyptic as we saw in 2008,” said Michael Englund, chief economist at Action
Economics LLC. “Even though the economy overall continues to grow, the housing
sector has topped its growth. It is as large as it wants to be, and it does not
want to grow.”

In addition to low affordability and rising
interest rates, experts see another cause for concern about the outlook for the
housing market: millennials. They are buying homes to a lesser extent than Generation
X and the baby boomers. When they do buy homes, millennial first-time home
buyers are generally doing so later in life than previous generations.

“We have yet to reclaim the level of
transaction activity we had on the home market before 2018,” Englund said.
“Millennials are more prone to see other things as financial investments, while
the older generation saw real estate as a safe investment. It is not clear if
millennials prefer buying a house over renting.”

Monthly sales of existing single-family
homes declined throughout 2018, reaching an annual rate of 4.45 million in
December.

Among the 20 cities in the composite, Las
Vegas, Phoenix and Atlanta reported the highest year-over-year gains,
indicating that prices are still rising more steadily in places where homes are
more affordable. Three of the 20 cities reported greater price increases in the
year ending December 2018 versus the previous month.

Metro areas like New York and Miami have
long struggled with low affordability and are approaching peak home prices. In
many high-demand West Coast cities, including Seattle, San Francisco and Los
Angeles, home price gains are slowing sharply. Whereas homes in cities in the
South and East, and cities like Albany and Chicago, are much more affordable
and safer, as the gap between house prices and income is smaller.

For many Americans, owning a home is a
fundamental financial safety net, and increasing home values can make consumers
more confident about spending. Declines in housing prices and activity would
usually be seen a cause for concern, as serious problems in the housing market
have previously tipped the economy into recession.

Even though the economy has slowed it remains steady, and economists say that, as in 2007, there is no sign it will fall into recession, despite some issues in the housing market.

“The housing market is probably in okay shape,” Shipley said. “Home prices are still up 5% year-over-year, which means home owners get a good return on their investment.”

]]>http://dismalscience.journalism.cuny.edu/2019/03/12/home-price-growth-slows-for-9th-straight-month/feed/0Growth slows in U.S. manufacturing as tariffs and winter weather hit factorieshttp://dismalscience.journalism.cuny.edu/2019/03/03/growth-slows-in-u-s-manufacturing-as-tariffs-and-winter-weather-hit-factories/
Sun, 03 Mar 2019 22:13:53 +0000http://dismalscience.journalism.cuny.edu/?p=911The White House during a late February snowstorm. (Official White House Photo by D. Myles Cullen)

The U.S. manufacturing sector slowed in February, with factory employment, new orders and productivity expansion rates all dipping below January levels.

February’s purchasing manager index (PMI) from the Institute for Supply Management was 54.2, a 2.4 percentage point decrease from January and the index’s lowest number since Donald Trump took office. This mid-50s result still indicates that the manufacturing sector is expanding but continues a downward trend from August’s 60.8 annual peak.

Several factors explain the slowdown in the ISM’s manufacturing index, including Trump’s trade war with China, an overall slowing of the global economy and in some cases, winter weather.

Multiple respondents to the ISM’s survey mentioned tariffs as a factor in February’s drop.

A purchasing manager from the Petroleum and Coal Products industry said their business was hurt by the uncertainty of steel prices following Trump’s 2018 steel tariffs. A Computer and Electronics purchasing manager told the ISM that prices had increased for electronic components in anticipation of a March round of tariffs, a measure that has since been put on hold by the U.S. as trade talks with China progress.

“We are seeing global weakness begin to set in,” said Lindsey Piegza, chief economist at Stifel Financial Corp. “We expect ongoing volatility there reflective of the very contentious trade environment. The best-case scenario is the hope that we reach a deal with China,” she said.

Tariffs did not stifle all manufacturing trade growth in February. The ISM’s survey showed growth in both imports and new export orders.

Imports rose in February following a three-month decline in expansion, though still came in well below expansion levels from June 2018 when Trump’s steel and aluminum tariffs first took effect.

11 of the 18 industries surveyed by the ISM did not see improvements in export orders last month. Export growth was fueled primarily by two large industries said Timothy Fiore, chair of the Institute for Supply Management Manufacturing Business Survey Committee.

The ISM’s report indicated that winter weather conditions slowed productivity for some regional manufacturers. A Chemical Products purchasing manager told the ISM that weather was a challenge this year. Several automotive manufacturers suspended factory operations in the Midwest due to cold weather in late January.

Friday’s manufacturing report came a day after the Commerce Department reported a slowdown in GDP growth in the fourth quarter of 2018. Economists say the ISM’s February result is unlikely to spark any policy changes at the Federal Reserve.

“It’s consistent with continued growth in the overall economy, but not to the point where the Fed has to tap on the breaks,” said Scott J Brown, chief economist at Raymond James & Associates. “It’s not suggesting, either, that the economy is falling apart.”

“It’s hard to discern a longer-term trend from one data point,” Piegza noted.

]]>New Orders for Durable Goods Up in December, but Economists Suggest Underlying Weaknesseshttp://dismalscience.journalism.cuny.edu/2019/02/28/new-orders-for-durable-goods-up-in-december-but-economists-suggest-underlying-weaknesses/
Thu, 28 Feb 2019 19:59:12 +0000http://dismalscience.journalism.cuny.edu/?p=897Demand for U.S. durable goods increased in December, but an important measure of business investment dropped, suggesting that companies are becoming less confident in the economic outlook.

New orders for U.S. durable goods — products that have a life expectancy exceeding three years, such as automobiles, computers and aircraft equipment — increased 1.2%, the Commerce Department said Thursday. But the gain was due mostly to a 28.4% rise in new orders for nondefense aircraft parts, in part from a surge in Boeing orders. Excluding the transportation component– which can falsely buoy the data — new orders for durable goods were up only 0.1%.

Despite these gains, orders for core capital goods – which exclude volatile orders for defense and aircraft equipment and are a strong indicator of business investment —dropped 0.7% following a 1.0% decline in November, indicating a slowdown in investment.

“The underlying strength of orders is somewhat weaker than the headline would anticipate,” said Jonathan Millar, senior U.S. economist at Barclays Capital. “If you take away the transportation categories the trajectory looks much more flat.”

There are several uncertainties in the economy that are contributing to slowed investment: tariffs and trade tensions with China, the impending effects of Brexit and an overall deceleration of economic growth abroad.

A fading fiscal stimulus from the 2018 tax cuts and the recent government shutdown could be affecting investment spending as well, economists said.

“Uncertainty is not a positive for domestic investment,” said Millar. “If there is uncertainty, producers have an incentive to push back spending on capital goods.”

Economists think that investment will rebound later in the year. However, if uncertainties, such as the trade war with China, are not dealt with, investors’ confidence could continue to drop, causing them to pull further back on expenditures, hurting the manufacturing sector and the economy at large.

Other economists were less concerned. Michael Englund, chief economist at Action Economics, shrugged off the decline in core capital goods, citing a negative news cycle in December. He focused instead on positive indicators in shipments and the revised number from November.

“Everything but the orders for capital equipment numbers seem to be pretty firm. We really see the drop in those orders figures, which are forward-looking, is largely in fact of the very negative news flow that we saw in December,” Englund said. “It was a bad month for news.”

Shipments for durable goods–a measure that reflects how well the economy is doing at the present time and is used to calculate the GDP — were up 0.8% overall and up 0.5% in shipments for core capital goods. The number for all new durable goods orders from November was revised up, a positive sign for the economy.

Englund also suggested that people are underestimating the boost from the stimulus plan.

“We think that the market may have jumped the gun for assuming that we are seeing the end of the boost from the stimulus,” he said. “We think that boost probably extends another two to three quarters.”

Economists mostly agreed that gains will continue to be moderate throughout the year, especially once the uncertainties dissipate.

“Once these uncertainties clear, companies will likely resume growing their investments, but we’re just not at this stage yet,” said Yelena Shulyatyeva, senior U.S. economist at Bloomberg Economics.

]]>U.S Retail Sales report a record 10-year lowhttp://dismalscience.journalism.cuny.edu/2019/02/25/u-s-retail-sales-report-a-record-10-year-low/
Mon, 25 Feb 2019 22:21:46 +0000http://dismalscience.journalism.cuny.edu/?p=883Retail sales saw the biggest drop in nine years in December, hinting to a decline in consumer spending in 2018.

Sales fell by 1.2 percent in the final months of the year, the Commerce Department said Thursday. The drop surprised economists, as they expected an increase after the November report which showed that consumers were in the buying mood for the holidays.

“It was a stunningly bad result,” said Christopher Low, Chief Economist at FTN Financial. “It suggests that U.S. households have cut back significantly.”

The drop could reflect falling consumer confidence, a bad sign for the economy, which eroded as the U.S stocks recorded losses not seen since the great depression in December. Further, tension-filled trade talks with China and the increase in interest rates also pointed to more problems for the economy under the Trump era, Low said.

“It suggests that growth has reverted,” he said.

New data from the Federal Reserve bank of New York showed that American consumers were late by three months on their car loan payments. This might affect spending, another sign that the economy is headed towards troubled waters with a possible slow down over the course of 2019 said Michael Englund, Chief Economist at Action Economics LLC.

The decrease was not in just one sector of retail sales demonstrating “the fact that the decline was broad based,” said Englund. Even the E-commerce sector, which had been steadily rising throughout 2018, saw a decline. Online sales fell by 3.9 percent, the biggest fall since November.

Some Economists wondered if the numbers were affected by the shutdown as the government was not funded during some of the data collection period.

However, the Census, which is responsible for the collection of this data put out a statement saying that the “processing and data quality were monitored throughout and response rates were at or above normal levels for this release.”

What did not surprise economists was the decline in gasoline prices as the American oil production reached new highs amongst other factors in 2018 according to the U.S Energy Information Administration.

The retail sector as a whole on the other hand hired more workers, signalling to a strong labor market, Eglund said.

The consumer price indexwas unchanged for the third month in a row, the Bureau of Labor Statistics said on Wednesday. Prices were up 1.6 percent from a year earlier, the lowest rate of annual inflation in over a year. Core inflation, which excludes food and fuel prices, was up .2 percent in January, making the year-over-year inflation rate 2.2 percent, unchanged since November and in line with economists’ expectations.

The modest rate of price growth supports the Federal Reserve’s pivot to backing off from interest rate raises early this year, even while unemployment remains low and wages rise. The Fed looks at the core inflation to determine monetary policy, and and with little change in the January report, and inflation pressures described “muted” by the Labor Department, there is not a need to raise borrowing costs.

Economists are watching for potential signs of a rising inflation in 2019, which would give the Fed cause to change monetary policy. A jump in commodities could suggest a potential uptick inflation going forward. When more people are employed and high wages brought on by businesses competing for workers, more consumer demand could drive up prices.

“Inflation shows no indication of getting out of control any time soon,” said Ryan Sweet, a senior economist at Moody’s Analytics. “It seems like the tightness in the labor market isn’t translating into higher inflation yet, therefore I think all indications are the Fed can sit tight for now.”

Last month, the Federal Reserve’s chairman Jerome Powell cited low inflation, slowing growth in China and Europe and the possibility of another government shutdown as reasons for holding off interest rate hikes in early 2019.It was a stark change in tone from 2018, when the Fed bumped rates four times, showing it thought the economy was strong.

The drop in energy prices for a third straight month, which showed gasoline prices down 5.5 percent in January, stood out to economists as a continued drag on inflation. In December, gas prices dipped 7.5 percent. This offset price increases for other U.S. goods and services, such as apparel, medical costs and new cars, that contribute to a higher cost of living.

“That’s very positive for the consumer,” said David Berson, chief economist at Nationwide Insurance. “It may not be as positive for the oil companies, but the average consumer will have more money in her or his wallet after paying to fuel their vehicle.”

Despite the overall low rate of inflation, there were hints in the report that price growth could accelerate this year. Economists are especially keeping an eye on the .4 percent jump from December to January in core commodity prices, which account for goods such as apparel and new cars. It’s unclear yet whether that’s a sure sign of the strengthening economy pushing core inflation up, or an insignificant one-off increase.

“Is it a one-month blip? We don’t know yet, but it is certainly something to watch,” Berson said.

]]>

In California—and nationally—a labor shortage underlies the housing crisishttp://dismalscience.journalism.cuny.edu/2018/06/01/in-california-and-nationally-a-labor-shortage-underlies-the-housing-crisis/
Fri, 01 Jun 2018 19:51:57 +0000http://dismalscience.journalism.cuny.edu/?p=865In 2016, when Liza Jane Norman’s mother passed away, Norman was tasked with selling the home in Hollywood Hills where she was raised as part of settling the estate. When Norman started looking for contractors to make some repairs at the house before putting it on the market in April of 2017, she noticed a theme.

Finding handymen who would take on her simpler projects was not a problem. Bigger projects—particularly the roofing work she needed done—was a different story.

“They were backed up for months. It was really hard to find a roofer— I went through a lot of companies!” said Norman, 67, a textile artist, homeowner and mother of two who lives in Oakland. “I mean, it was insane.”

Norman’s experience is a common one these days in Southern California, where contractors and other industry employers are scrambling to hire skilled workers.

This skilled construction labor shortage has arisen at a bad time. California has historically struggled to keep pace with demand for housing as its population grows.

Now, the shortage of housing is so pronounced that the California Department of Housing and Community Development recently issued a report calling for a 100 percent plus increase in annual housing stock production. Even with this dramatic increase, the 1.8 million units this push would produce by 2025 still low for meeting the needs of the state’s nearly 40 million residents.

The construction labor shortage is an added headache in an industry already burdened by a housing shortage. In the golden state’s southern cities, special interest groups have grown adept at taking advantage of state regulatory mechanisms to exert control over developers, hobbling much-needed housing projects—particularly affordable housing. These issues, while exacerbated in the region, represent problems that exist nationally— and according to industry experts, effective solutions remain elusive.

Twenty-five miles from Norman’s old family home, at the headquarters of the Southern California Builder’s Association, the organization’s officials are struggling to identify ways to support its subcommittee on labor shortage as its members seek skilled workers.

In 2016, the Association added a “Skilled Labor Brain Trust” presentation to the lineup of its annual conference to connect employers with organizations that train and educate the new generation of construction workers.

But prioritizing the labor shortage when there are so many other demands on the Association’s members is difficult, said Karissa Willette, an Association spokesperson.

“They’re building as fast they’re allowed, actually, with all the regulation at the local level, the community level,” said Willette. “There has been a lot more development recently.”

Similar issues exist across the country. As the United States continues its recovery from the 2008 burst of the housing bubble, both housing starts and the Case-Schiller index have continued to trend up for nearly a decade.

The millennial generation approaches the median age for first time home buying. The housing market is tight, and prices for existing homes are up as a result.

This has resulted in recovery in the construction industry—but not enough recovery.

Between March of 2007 and February of 2011, construction employment in the United States fell by a seasonally adjusted 2.3 million workers from 7.7 million, the highest level ever recorded, to 5.4 million, a 15-year low.

Since then, construction employment numbers have risen steadily for seven years, and 1.8 million jobs have been added back to the industry. Though the growth has proven sustainable, employment levels remain about 500,000 workers short of the 2007 peak. and economists say employment levels need to be higher to meet demand. Since they’re not, it’s hurting the growth in housing stock.

“It takes two to three years to build a large skyscraper of apartments, and it only probably takes six to nine months to build a home,” said Stan Shipley, a senior economist at Evercore ISI. “But the shortage of labor has stretched those timelines out.”

California is not the only place where addressing the labor shortage has proven difficult. National trade organizations are working to address the issues as well—and those issues run deep.

“A lot of people are retiring, because of demographics,” said Brian Turmail, the senior director of public affairs for the Association of General Contractors of America. “And we don’t have many people seeking careers in construction, largely because we don’t do much to signal as a public education system, or even as a culture, that high-paying careers in construction are careers people ought to be pursuing.”

“We’ve dismantled, more or less, what was once a robust vocational education system in this country. If you don’t even​ expose students to the fact that this is a career option, you shouldn’t be surprised if few choose it as a career.”

To reach those students, AGC has been a strong proponent of investment in federally supported vocational training that can create a pipeline of skilled workers to trade unions and employers who partner with the training programs.

To the same end, the Southern California Builders Association is working on a social media campaign to educate millennial community college students about careers in construction. Outreach to those students also includes invitations and free transportation to industry events to meet potential future employers.

But advocates fear that initiatives like this are not enough to address the construction labor shortage effectively enough to manage the housing shortage. As homeless numbers soar in urban Southern California, the need for housing becomes ever more dire.

“This is definitely one of the major crises in urban America and particularly in California,” said Tom De Simone at Genesis L.A. “and there’s not a ton of leadership on it, to be quite frank about it, there really isn’t. There’s a lot of talk, and everybody can identify the problems, and there’s very, very little meaningful action.”

The U.S. Commerce Department is scheduled to release its monthly durable goods report on Friday. The report will cover business investment data derived from April. Over the past few months, prior reports have shown high fluctuations between new orders and shipments, but economist expect U.S. durable goods will continue to increase. Here are five things to look for upon its release at 8:30 a.m. EDT.

1. New orders continue to grow

New orders for U.S. durable goods saw a 2.6 percent increase back in March. A huge improvement after the 3.5 percent decline in January. “We’re expected to show a 0.5 percent rise Friday,” said David Sloan, senior economist at 4cast Ltd. “The trend is for continued acceleration, we’re sure to see a positive outcome.” Sloan said he thinks new orders in April will remain high and steady.

2. Large aircraft orders set create a volatile outcome

Both Boeing Co. and its rival Airbus are planning to order a large amount of narrow-body orders. Items ranging from toasters to aircraft, increased 2.6 percent in March. The move is set to have an impact on April’s total new orders. “Boeing orders for March were strong,” said Carl Riccadona, chief economist at Bloomberg. “Reports of these new orders should help Friday’s headline durable goods number.” New orders, excluding transportation are likely to remain the same.

3. Expected slow-growth in capital goods shipments

Shipments for core capital goods have experienced back-to-back increase in both January and February. New orders for key U.S.made capital goods unexpectedly fall in March. Machinery also had the biggest drop in demand. “I was not expecting that,” said Riccadona. “But I think we’ll see a slight increase this week compared to March.”

4. The new tax plan has little impact

The strong labor market has helped the economy and the Trump administration’s $1.5 trillion income tax cut is expected to boost it even more. “Businesses are investing because they haven’t felt the pinch despite recent tariffs on steel and aluminum,” said Andrew Opdyke, an economist at First Trust Portfolios LP. Overall the economy is not slowing down its economic growth. “Tariffs is risk for the manufacturing sector,” says Sloan. “If it generates into a full-scale trade war, there will be some negative impact on industries as a whole,” said David Sloan, economist at 4cast Ltd.

5. Signs of an overall strong economy

The U.S. Department of Labor reported an addition of 164,000 new jobs while the unemployment fell below 4 percent for the first time since 2000. Manufacturing payrolls rose 24,000. April’s durable goods report is expected reflect the current status of the U.S. economy. “More people are working, but I don’t think we’re at full employment quite yet,” said Sloan.

]]>For-Profit Colleges in New York Crush Students with Debt and Low Wage Careershttp://dismalscience.journalism.cuny.edu/2018/06/01/for-profit-colleges-in-new-york-crush-students-with-debt-and-low-wage-careers/
Fri, 01 Jun 2018 18:38:50 +0000http://dismalscience.journalism.cuny.edu/?p=859

In the U.S., earning a postsecondary degree can be perceived as a way to earn more money and have a sustainable career. Students often make their decision on which college to attend based on which program will provide them with the best educational boost. This was the same thinking Shivanand Manraj, 34, took into consideration when he applied to TCI College of Technology in New York City.

“I decided to go to college because I never went to college when I was younger,” said Manraj. “I wanted to accomplish my dream of attending college and was hoping TCI would help me get a job in the computer industry.”

Manraj said he chose TCI for its affordability. But after graduating, he was not able to find a job and currently struggles paying off his student loans that total over $20,000.

According to the Center for an Urban Future, roughly half of students who attend a New York based for-profit defaulted on their student loans. Despite its alarming statistics, the Trump Administration has provided new life to for-profit colleges. New York State has done the same with plans to spend millions of dollars more in tuition assistance to students at for-profit colleges despite dismal results for graduates.

“I have been struggling to pay off my student loans since after I graduated and I’ve been unable to find a decent job with the degree,” said Shivanand Manraj, who graduated back in 2012.

New York State boasts about 141 for-profit colleges and at nearly nine percent of those programs, graduates earned less than the 2015 federal poverty threshold of $12,331. About 73 percent of graduates earned less than $25,000, which is the average wage of high school graduates.

“In nearly 38 percent for-profit programs, graduates’ student loan repayments totaled more than 8 percent of their annual earnings,” Tom Hillard, a senior fellow for economic opportunity at the Center for an Urban Future. “This places an enormous burden on these students as they entered the workforce.”

Donna Stelling-Gurnett, the president and CEO of New York’s Association of Proprietary Colleges (APC), said these numbers are not inaccurate and that graduates only accumulate an average of $21,900 in student loan debt.

“That’s significantly lower than both New York State’s average student loan debt of $32,200and the national average of $29,700,” said Stelling-Gurnett, who also said a recent member survey showed their colleges reported an average 85 percent job placement rate.

“Not only are students attending APC member colleges staying in New York after graduation, they are filling the needs of local employers, especially in high demand fields such as healthcare, and contributing to the overall economic development of New York State.”

The biggest issues, aside from graduation rates and loan amounts, is that many for profit colleges practice unethical methods when recruiting and retaining students. Although New York joined several states in launching legal challenges to crack down on fraudulent and corrupt for-profit college chains during the Obama administration, the industry has few regulatory obstacles to fear under Trump, and is now aggressively lobbying both Albany and Washington to reclaim lost market share.

Manraj said his advisors told him he would only need to complete four semesters in order to graduate, but that narrative quickly changed.

“They told me I needed to complete a fifth semester to be able to complete the program,” said Manraj. “That semester was a total amount of over $25,000 dollars and I already took out loans for four semesters, so this news was heartbreaking.”

Hillard, with the Center for an Urban Future, said this type of aggressive and deceptive marketing tactics are common among for-profit colleges.

“The business model of these schools is that they rely on tuition payments from students, so the more grant or federal aid a student gets, the higher the tuition they will charge,” said Hillard, who wrote a study on the state’s for-profit colleges. “But New York spends more than $37 million dollars on schools that have terrible outcomes for its students.”

Many schools wind up closing after losing their accreditation for these harmful marketing tactics, high loan default rates and poor employment outcomes.

“Whenever we see unethical conduct or very weak outcomes – in any sector – we report it and provide resources and guidance to help resolve the situation, as appropriate,” said Stelling-Gurnett, with APC.

TCI College was one of those schools.

“The degree is useless now,” said Manraj. “I feel like I wasted two years and unnecessary loans on a unpromising degree.”

New York’s Tuition Assistance Program, or TAP, is one of the biggest state financial programs. All students in higher education are eligible and it’s goal is to help cover the full cost of tuition at public colleges and a large amount at for profit colleges. In December, New York Governor Andrew Cuomo vetoed a measure that would have extended the tuition-free scholarships to the for-profits, but as of this year, it was just approved in the state’s budget plan.

But in 2014, the U.S. Department of Education took steps to prevent schools from using government aid without producing results.

“Under the Obama administration, the Department of Education said they would screen and prevent financial aid dollars from going to colleges that consistently turned out graduates who couldn’t access decent-paying jobs and who were highly likely to default on their student loans,” said Hillard.

But under the Trump administration that program has ended, which means it’s up to individual states to determine if they will screen colleges.

It’s a move Hillard doesn’t think will end well for those that matter. That’s because about $31 million dollars in TAP dollars are going to colleges at which less than 30 percent of former students made a single payment to their loan principal within three years of entering repayment.

“I have maxed out in deferment and right now have not paid anything on my student loans,” said Manraj, the student who graduated from TCI College, with an associate’s degree in computer science. “My only wish is that I could get the student loan debt forgiven so I can start off fresh again and attend a proper college to get a real degree.”